Gold Bulls Lured Back for First Time in Two Months: Commodities – Bloomberg 10-20-14

Salient to Investors:

  • Eric Zoldan at JHS Capital Advisors said that over the last two weeks, it is much clearer that while money is flowing out of all asset classes, it is not flowing out of the gold market, and that deteriorating global growth and demand is leading investors back to gold.
  • Bank of America Merrill Lynch lowered its 2015 outlook for gold to $1,225.
  • Rob Haworth at US Bank Wealth Mgmt said gold prices are indicating a short-term shift in market sentiment rather than a change in underlying fundamentals – US fundamentals remain good, while European fundamentals are not horrible, and the economic story is not falling apart.
  • Ashmead Pringle at GreenHaven Commodity Services said corn and soybeans have bottomed here for a while as the big harvest has been discounted, and the harvest still has a good way to go in the major corn areas,
  • American consumer confidence rose is at the highest in 7 years.

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Gold Bulls Extend 2014 Exit as Slump Erases $6.7 Billion – Bloomberg 09-22-14

Salient to Investors:

  • Gold held in ETPs are the lowest in 5 years, gold’s 60-day volatility is near a 5-yr low, and open interest near the lowest since 2009.
  • Brian Levitt at OppenheimerFunds sees no compelling reasons to be in gold, and said no inflationary pressures and a Fed that will tighten sooner than most of its trading partners portends a strong dollar and weaker gold prices.
  • Aram Shishmanian at the World Gold Council said the expansion of trading hubs in Asia will boost demand in China by 20% in 3 years.
  • George Gero at RBC Capital Markets sees a gradual return of retail buyers, says the gold price is very attractive, and expects more buying out of China and India ahead of the festival and marriage season. Gero cites much political turmoil in 2014, and says people want to hedge the bad things happening in the world.
  • Mayer Cherem at Pacific Alternative Asset Mgmt said everything comes back to fundamentals in the agricultural sector – the global crop situation is very comfortable, and there are expectations of big harvests for most crops – and sees much more downside in soybean prices, and weaker corn prices.

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Gold Shines Again as Hedge Funds Boost Wagers on Advance – Bloomberg 07-08-14

Salient to Investors:

  • Money managers increased net-long positions in gold for a fourth straight week through July 1 and assets in gold-backed global ETPs are rising at the fastest pace since November 2012.
  • John Kinsey at Caldwell Securities expects further gold strength through 2014.
  • Societe Generale predicts gold prices will fall by year-end.
  • Barnabas Gan at Oversea-Chinese Banking said gold will fall to $1,150 by year-end.
  • Goldman expects gold to fall by year-end and drop to $1,050 in 12 months.
  • Chad Morganlander at Stifel, Nicolaus expects gold prices to fall as the global economy improves and the US economy accelerates in the coming months.
  • The Linn Group said corn output in the US will jump to the highest ever this year.
  • Sameer Samana at Wells Fargo Advisors said it is hard to see how corn prices can rise given record acres and record yields.


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Gold to Coffee Drive Bullish Bets to 17-Month High – Bloomberg 02-25-14

Salient to Investors:

Hedge funds’ net-long positions of 18 US-traded commodities rose 18 percent last week to the highest since September 2012. Investors tripled the net-long position in arabica coffee this month to the most bullish since May 2011

Barclays said weather is the big driver of commodities.

EPFR Global data show commodity funds are headed for the first monthly inflows since September 2013.

Brazil is having its weakest rainy season in decades, just when moisture is needed the most for coffee tree roots to absorb soil nutrients.

Rabobank Intl said yields and quality for arabica beans will be constrained during this season and the next, and prices will be supported by longer-term concern that output will be limited.

Rabobank said soybean production in Brazil and Argentina is still projected to climb 10 percent, even with the dry weather. The USDA said corn and soybean harvests in the US in 2014 will be the biggest ever, meaning an increase in stockpiles before 2015’s harvest.

Dan Cekander at Newedge USA said grain fundamentals themselves do not suggest a bull story – not without a significant Northern Hemisphere problem in 2014.

Goldman Sachs said the S&P GSCI Enhanced Commodity Index will fall 4.3 percent in the next 12 months, agriculture will decline 9 percent, and precious metals will fall 14 percent.

Gold bets climbed 31 percent to the highest since October 29.

David Mazza at State Street Bank & Trust said assets in the SPDR Gold Trust are heading for the first monthly inflow since December 2012.

Cameron Brandt at EPFR Global said commodity funds are heading for their first monthly inflows since September.

Mark Luschini at Janney Montgomery Scott said the decline in prices last year has helped re-establish equilibrium between supply and demand, so better growth should pull industrial commodities higher, though we are not back in the middle of a commodities super cycle yet.

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Goldman Pares 12-Month Commodity Outlook After Crude’s Rally – Bloomberg 07-23-13

Salient to Investors:

Jeffrey Currie et al at Goldman Sachs said:

  • They cut their 12-month commodity return forecast for the S&P GSCI Enhanced Commodity Index to 0.1 percent, maintained a neutral recommendation on raw materials, while precious metals and agricultural commodities may drop 8 percent and base metals will gain 6 percent.
  • Gold may decline to $1,050 at the end of 2014.
  • Corn will decline in half2 2013 as increased US acreage boosts output, bolstering reserves, and their 12-month estimate is $4.75 a bushel.
  • The strategic case for holding commodities remains strong, partly because raw materials are a hedge against geopolitical risks.

UBS says slow US economic growth will boost equities more than raw materials,  is bearish on gold, and rates commodities as underweight.

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Morgan Stanley Backs Gold, Corn, Beans as Best Picks in 2013 – Bloomberg 12-06-12

Salient to Investors:

Peter Richardson and Hussein Allidina at Morgan Stanley said:

  • Calls for the end of the commodities super-cycle is too simplistic as commodities are cyclical but the elasticity of supply and demand and length of the cycle vary significantly.
  • Gold, silver and corn will outperform other raw materials next year as a weaker dollar and rising investor demand bolster precious metals while supply curbs aid grains. Gold will average $1,853 an ounce in 2013 due to low real interest rates, buying by central banks and geopolitical uncertainty. Silver will average $35 an ounce.
  • Corn and soybeans should benefit from harvest delays in South America
  • Aluminum, sugar, nickel and uranium are bearish as supplies will outpace demand.

Jeffrey Currie at Goldman Sachs reiterated an overweight call on commodities, forecasting a 7 percent return in 12 months. With supply constraints easing, China slowing, and producer-company returns normalizing, Currie said it is tempting to say the super-cycle is over,  but this is simply the next phase of a commodity-investment cycle that began in the late 1990s. Goldman likes crude, corn and copper, and expects gold to peak in 2013 on a recovery in the US economy.

Edward L. Morse at Citigroup believes the super-cycle has ended.

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Drought No Obstacle to Record Income for U.S. Farms: Comm – Bloomberg 11-20-12

Salient to Investors:

US farmers are having their most-profitable year ever because of record-high prices and insurance claims and despite the worst drought in a half century.

The government predicts food inflation will accelerate next year, led by meat, dairy and baked goods.

The UN said says the global cost of food imports will drop 10 percent in 2012 – world food prices are 10 percent below the record in February 2011.

The government predicts an 8.6 percent drop in US wheat, soy and corn exports next year. Informa Economics says global corn production may jump 14 percent next year as wheat output gains 7.5 percent.

Bullish bets by hedge funds et  al across 11 U.S. farm goods declined in 9 of the past 10 weeks.

Richard Pottorff at Doane Advisory Services said insurance payouts will surge because most policies were linked to prices at the harvest.

Farm income has more than doubled since 2006, and 3 consecutive years of record profit left US farmers with a ratio of debt to assets of 10.2 percent,  a record low.

Farmland in Iowa rose 18 percent in the year that ended Oct. 1. Alex J. Pollock said the surge in farmland prices signals the market may be in a bubble, vulnerable to higher interest rates and lower crop prices.

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Traders Eye Grain Prices Rebound as Supply Set to Tighten – Bloomberg 10-08-12

Salient to Investors:

Grain demand is robust and global stockpiles are tightening – USDA data shows world corn and soybean stockpiles as a percentage of consumption may drop to a 37-year low after dry weather in the US, South America and Europe.

Hussein Allidina at Morgan Stanley said wheat prices will be supported as livestock farmers substitute more of the grain in feed for high-cost corn. Allidina said inventories are the tightest they’ve been in his lifetime, and there’s no spare capacity.

Sudakshina Unnikrishnan at Barclays expects CBOT soybean prices to rally to $18 a bushel.

David Sheppard at Gleadell Agriculture said the markets will rebound as we’re in the calm before the storm with world grain markets – Russia and Ukraine are running out of exportable surpluses, France is selling quite aggressively into recent tenders.

Roger Baker at CHS said Russia is unlikely to ship much grain after the end of 2012 because prices are climbing. Corn has the highest potential for gains, while wheat prices will likely only follow moves in corn.

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Commodities Beat Stocks, Bonds for Second Month in August – Bloomberg 09-03-12

Salient to Investors:

Commodities beat equities, bonds and the dollar for a second consecutive month, the longest streak in more than a year, showing investors expect policy makers to succeed in stimulating growth.  More than two-dozen nations cut market interest rates this year. China has slowed for six quarters.

Bill O’Neill at Merrill Lynch said the market has clearly taken a very sanguine view

Raw materials entered a bull market last month after rising more than 20 percent since mid-June, erasing 2012’s losses.

Goldman Sachs predicts oil will advance 19 percent to $115 in three months, soybeans 14 percent to $20, and corn 13 percent to $9.

Hedge funds own close to their biggest bet on rising raw-material prices since May 2011.

71 percent of S&P 500 companies reported quarterly earnings that beat analyst expectations.

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Global Food Reserves Falling as Drought Wilts Crops – Bloomberg 08-09-12

Salient to Investors:

Stockpiles of the biggest crops will decline for a third year on drought in three continents.

U.S. crops are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall is 20 percent below normal.

Goldman Sachs, Macquarie Group and Credit Suisse say crops will continue to be the best-performing commodities this year.

The U.S. drought in June was the widest since December 1956, while the past 12 months were the hottest on record.

U.S. nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant.

Global food prices are still 10 percent below the record reached in February 2011.

Barclays  is “modestly overweight” in grains and soybeans, but recommended investors reduce bullish bets as improving weather, declining demand or an easing of U.S. requirements for ethanol in gasoline may send prices lower

Goldman predicted $9 corn, $20 soybeans, $9.80 wheat in three months.

Danske Bank predicts global food prices will jump 25 percent this year .

Gates Foundation says U.S. households spend 6 percent of their total expenditures on food versus 35 percent in India and 45 percent in Kenya. The USDA says with less than 5 percent of the world population, the U.S. consumes 31 percent of global corn production, 18 percent of soybeans, 32 percent of cheese and 20 percent of beef and veal.

The National Intelligence Council says nations reliant on food imports, including Egypt, Pakistan, Bangladesh and Sudan, are especially vulnerable to unrest. More than 60 food riots erupted worldwide from 2007 to 2009 as prices surged, the U.S. State Department estimates, while the U.N. says production will need to expand 70 percent by 2050 as 2 billion people are added to the population.

Professor Tim Hagle at the University of Iowa says retail-food costs keeps the economy in a fragile position, the big issue in this election.

Steve Hatz at Bank of the West said U.S. farmers are less likely to feel the pinch because about 85 percent of crops are insured.

Ron Plain at the University of Missouri said livestock ranchers lost $260 a head in June versus a $156 loss a year earlier.

Steve Shafer at Covenant Global Investors said global beef inventories are dropping in part because rising incomes in emerging markets mean consumers want to eat more meat, causing a rising supply/demand imbalance.

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